WASHINGTON (AP) _ An Iraqi power plant rebuilt with tens of millions of U.S. dollars fell into disrepair once transferred to the Baghdad government, according to the U.S. office that tracks reconstruction spending.

The Iraqis' failure to maintain the 320-megawatt Doura plant, considered an important source of power for electricity-starved Baghdad, is just one of the issues hindering attempts to rebuild the country, the latest audit report to Congress concludes.

Also crippling the efforts are anemic capital spending by Iraq's central government ministries and its provinces; continued challenges faced by contractors in fulfilling the terms of their contracts; and endemic corruption.

Such theft, fraud, skimming and other corruption amount to a ``second insurgency,'' the special inspector general for Iraq reconstruction, Stuart Bowen Jr., wrote in his quarterly report, being released Monday.

``It's another enemy that Iraq has to fight. Security is the paramount challenge that the Iraqi government has to solve, but right behind that is corruption, particularly involving oil smuggling,'' Bowen told The Associated Press in an interview Sunday.

``This report presents a mixed picture,'' he said. ``But it's too early to say whether we are going to render effective, enduring results. There are signs of progress this year.''

Among those signs, Bowen said, is Iraq's production of 2.1 million barrels of oil a day in the latest quarter, compared with 1.9 million the previous quarter and 1.8 million barrels before that. He noted that Iraq was producing more than 2.4 million barrels a day before the U.S.-led invasion in 2003.

Despite the setbacks with the power plant, Bowen said Iraq's electricity supply still rose to 4,230 megawatts, compared with 3,900 megawatts during the previous quarter and 3,800 before that. But that is still below the prewar level of 4,500 megawatts, he said. Just two years ago, Iraq's electricity supply was more than 5,000 megawatts.

``Projects are getting done,'' Bowen said. ``But the impediment to growth in outputs of those has been insurgent attacks on the grid.''

The watchdog office provides oversight of the $44 billion allocated by Congress to rebuild Iraq. Bowen said he will testify before Congress on Tuesday about the latest report.

In an audit issued last week, the inspector general found the Iraqi government has refused to take control of more than 2,000 U.S.-funded reconstruction projects since June 2006. That has left U.S. officials to turn over the projects to local officials or to commit more money to keep them running.

Even when the Iraqi government has accepted rebuilt projects, it has let them languish.

The two units at the Doura power plant, for example, are not working despite a $90 million effort to repair them. The plant's Iraqi operators cannibalized equipment from one of the units as it neared functioning status to repair the second, after it had failed because of improper maintenance and operation. That second unit eventually failed again, according to the report.

``If this plant had been online since 2004, Baghdad would have had substantially more power,'' Bowen said in the interview. ``In addition, it's likely that the actual power generated would be above prewar levels.''

The Doura power plant represents 7.5% of the electric-generating capacity today.

The problems do not rest solely with the Iraqis, according to the report.

An audit of a $1.33 billion contract won by Bechtel National Inc. found that about half the water, sanitation, power and other projects awarded to the San Francisco engineering company failed to meet their stated goals. Some were canceled, others only partially completed and others transferred to other organizations for completion, the report said.

The government, too, hampered Bechtel's efforts by failing to provide sufficient staff to oversee the contract. Extensive use of subcontractors has made oversight difficult, leading to poor outcomes in some projects.

Even though the Iraqi government has assumed responsibility for managing the country's recovery, its spending on public works and other capital projects is falling far short of what has been budgeted, the report said.

For instance, last year, the government spent just 22% of its budget for capital improvements, while spending 99% of the allocation for salaries. Overall spending of the government capital budget should rise to 50% by year's end, the audit said.